Sen. Marco Rubio, R-Fla., penned an op-ed in The Wall Street Journal yesterday outlining why he won't be voting to increase the federal debt ceiling. Among his reasons: a protest against President Obama's recent 10-year budget proposal, which Rubio says (probably rightly) is far too generous on the spending side.
He writes: "There is no plan to stop. In fact, President Obama's latest budget request spends more than $46 trillion over the next decade."
Hold on a second. Here's a good rule of thumb. Anytime someone sums together ten years of figures in order to create a Really Big Number, they're probably trying to blow things out of context.
Rubio is right about one thing. Obama's 10-year budget forecast indeed calls for a cumulative $46 trillion in spending over the next decade (you can see it here, third page). But this is so out of context it's practically irrelevant. What matters in federal spending is not the dollar amount of outlays. It's outlays as a percentage of GDP. And we create a lot of GDP. For the same reason Berkshire Hathaway or ExxonMobil can earn a billion dollars without moving the needle, this country can spend an incredible amount without moving the needle in the grander scheme of things.
Obama's budget proposes spending as a percentage of GDP to average 22.7% over the next decade. How does this fare historically? Under Reagan it averaged 22.3%. George H.W. Bush, 21.9%. Clinton, 20%. George W. Bush, 19.5% -- those last two being blessed by a surging economy, which keeps automatic stabilizers (unemployment benefits, food stamps, etc.) down.
Obama's proposal is still above the average 21.2% since 1980. Given. But the degree to which spending is out of line isn't nearly what some make it out to be. Instead of gawking at the dollar amount of the proposal, a better way to describe it might be noting that, given two wars and the worst recession since the 1930s, spending as a percentage of GDP is forecast to be in line with comparable (1980s) averages over the coming decade.
This isn't any excuse to ignore the need to reduce spending. It does, though, provide something Rubio's op-ed is short on: context.
Fool contributor Morgan Housel owns shares of Berkshire and Exxon. Berkshire Hathaway is a Motley Fool Inside Value choice. Berkshire Hathaway is a Motley Fool Stock Advisor recommendation. The Fool owns shares of Berkshire Hathaway and ExxonMobil. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.